Tuesday, January 15, 2008

As absurd as it sounds, we may just have to do that soon. When the price of oil goes up, so does everything else. Latest news is that some airlines are considering changing how they price fares so that the price of fuel is figured separately. If this happens it will be interesting to see just how it will be done. It sounds like it can be compared to how some travel agencies advertise cruise prices where they neglect to show the port charges and tipping amounts. A price that looks to good to be true almost always is. It would be interesting to see what airfare would be minus the fuel cost but all I see is confusion if this happens. Smart companies buy forward on oil, but very few of the airlines do this, and fewer yet do it well. Southwest is the best of all airlines at hedging on oil prices. If they all followed Southwest lead, it would decrease the turmoil that a sudden jump in oil prices causes. The problem is that most airlines, unlike Southwest, are hurting and cant afford to tie up their cash and in the end it is going to be us the consumer that ends up parting with more of theirs.

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